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Greek PM says default would lead to ‘chaos,’ vows to push through austerity as protesters mob streets

By Derek Gatopoulos and Nicholas PaphitisAssociated Press

Fri., Feb. 10, 2012timer3 min. read

ATHENS, GREECE—Greece’s future in the eurozone came under renewed threat Friday as popular protests again turned violent and dissent grew among its lawmakers after European leaders demanded deeper spending cuts.

The country’s beleaguered coalition government promised to push through the tough new austerity measures and rescue a crucial €130 billion ($170 billion) bailout deal after six members of the cabinet resigned.

Greek Prime Minister Lucas Papademos promised to “do everything necessary” to ensure parliament passes the new austerity measures that would slap Greeks with a minimum wage cut during a fifth year of recession. He also promised to replace any other cabinet members who did not fully back his efforts.

“It is absolutely necessary to complete the effort that began almost two years to consolidate public finances, restore competitiveness and economic recovery,” Papademos told an emergency cabinet meeting.

Draft legislation for the new austerity measures was submitted to parliament after the five-hour meeting ended.

In central Athens, clashes erupted outside parliament between dozens of hooded youths and police in riot gear. Police said eight officers and two members of the public were injured, while six suspected rioters were arrested.

The violence broke as more than 15,000 people took to the streets of the capital after unions launched a two-day general strike that disrupted transport and other public services and left state hospitals running on emergency staff.

Scores of youths, some in gas masks, used sledge hammers to smash up marble paving stones in Athens’ main Syntagma Square before hurling the rubble at riot police.

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Debt-stricken Greece does not have the money to cover a €14.5 billion bond repayment on March 20, and must reach a vital debt-relief deal with private bond investors before then.

Papademos said the bailout and the deal with private creditors would return Greece to growth next year, and deliver a 4.5 per cent primary surplus in 2012 — better than an earlier official prediction of 1.1 per cent of gross domestic product.

“A disorderly default would cast our country into a catastrophic adventure. It would create conditions of uncontrollable economic chaos and social explosion,” he warned.

“Greeks’ standard of living in the event of a disorderly default would collapse, and the country would be swept into a deep vortex of recession, instability, unemployment and penury. These developments would lead, sooner or later, to exit from the euro.”

He also warned that, “Either we will achieve an agreement that will set the country on a new course, or, if we backtrack, in yet another historic display of cowardice, we will head for collapse. I want to be clear. These are not just crucial moments, they are dramatic for the country.”

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Earlier Friday, the small right-wing LAOS party in Papademos’ coalition said it would not back the new measures and four of its officials in the cabinet resigned, including the country’s transport minister. Two Socialists cabinet members have also quit.

LAOS leader George Karatzaferis said rescue creditors had humiliated Greece.

“Of course we do not want to be outside the EU, but we can get by without being under the German jackboot,” he said. “I would rather starve.”

Greece has promised to approve the new austerity measures as emergency legislation by late Sunday, despite deep public resentment. Papademos’ coalition is backed by 252 lawmakers in the 300-seat parliament.

The cuts include a 22 per cent drop in the minimum wage and plans to fire 15,000 civil servants in 2012, at a time when the unemployment rate is over 20 per cent and the economy is in a fifth year of recession.

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Eurozone finance ministers on Thursday said more austerity needs to be agreed to and set a deadline for the middle of next week.

“No disbursement without implementation,” Jean-Claude Juncker, the Luxembourg premier who also chairs the Eurogroup meetings, said after the eurozone ministers declined to fully back the deal Greek leaders had agreed to.

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